FINANCIAL MANAGEMENT AND CONTROL, A KEY TO MANAGEMENT EFFICIENCY: A CASE STUDY OF UNION BANK PLC, UMUOCHAM ABA
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FINANCIAL MANAGEMENT
AND CONTROL, A KEY TO MANAGEMENT EFFICIENCY:
A CASE STUDY OF UNION
BANK PLC, UMUOCHAM ABA
ABSTRACT
Financial Planning and Control when
properly employed can assist management achieve its objectives effectively. The
important of financial planning and control cannot be over emphasized although
it does not provide a conclusive evidence of management efficiency due to
inadequate planning and control based on some inherent factors. Planning and
Control are part and parcel of our activities and it is an essential factor in
business decision making. Financial Planning and control can be used by
any size of type of organization that want to survive and operate effectively.
For an efficient financial planning and control to exist in an organization,
such factors as:
-
Cost: The cost of planning and control financial will not exceed the cost of
running the business itself.
-
Repayment Date: The period of time fro which the finance is required
should be considered to enter into a scheme, with a repayment date.
-
Liquidity, Risk and availability of finance: The low cost finance is usually
associated with early repayment. The more risky a project is, the better it is
to finance it out of equity capital and where an organization manages its
resources judiciously, they enjoy lots of advantages.
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
It is a fact that we are living in an era of planning and control,
whether it is house wife with her household keeping allowances or an
industrialist with his responsibilities to the shareholders or even the
government has to plan and control its operational activities in order to
achieve their goals. Planning and Control are part and parcel of our activities
and it is an essential factor in business decision making.
In a competitive world where the key factors are cost, price, turnover and
profit, planning and control enables every individual firm and government to
have a sound appreciation of the financial implications to his plan and action,
financial planning and control can be used by any size or type of organization
that want to survive from a complete system covering decentralized department
to organization with only a single procedure.
As a tool of management, it can
increase the efficiency of the organization as a whole since all the
departments are involved.
Moreso, no business prospers unless all its functions, accounting, finance,
production, marketing, personnel and so forth are fully staff with competent
individual. The efficiency and effectiveness of any organization
therefore depends on a number of factors, which may be categorized as clarity
of purpose, management planning, control and communication.
There is need to have a clear knowledge of the objectives of the organization
otherwise it will not be possible to identify goals, set target for
their achievement in form of planning, control and management of its finance
(flow of funds)
According to Brigham and Campsey “Financial Management involves planning for
acquiring and utilizing funds in a way that maximize the efficiency and
value of the firms” Most specifically, finance is the evaluation and
acquisition of production assets, procurement of funds and disbursement of
funds. It involves four basic, which are the functions, they include:
-
Raising of funds to finance projects
-
Employment of these funds in valuable projects
-
Management of the cash flow arising from these projects
-
Returning of funds to their findings or original sources.
Financial manager’s duty is to employ
the acquisition, location and management of these resources. Finance therefore
spreads into all segments of firm activities thus its function must be
understood by all the managers in the firm. Having known the future
financial needs of a firms, the question then is how are this finances or
funds be raised. These required knowledge of the financial market through
the manager from which funds are drawn. It also required knowledge of how to
make drawn. It is also required a knowledge of how to make sound
investment decisions and to stimulate efficient operations in the organization.
These are alternative involved in financial decisions, the choices include the
use of internal or external sources. According to “Harper” before looking
outside a firm for funds, the possibility of providing such funds internally
should be examined.
This internal sources is mostly used for the firms operations and should not be
over looked when planning finance. They are generated from the operations
of the business, or retained profits, depreciation provisions, tax
provision and reduction in current assists. The external sources on the other
hand are made up of two mainly types namely: short term and long-term
funds. Short term consists of trader credit, Bank overdraft and promisory
notes. Long-term finance or funds refers to funds obtainable from loans with a
maturity dated several years in the future or funds the owners of the business.
Eg. Debentures. The external source consists of two broad types, equity and
debt funds. Equity funds represent the total interest of the owners of the
business in the firm of original shares contributions plus subsequent addition
either by additional investments or by ploughing back profits/reserves into the
business. Debt funds on the other hand are the long-term debt obligations of
the business and it usually made up of secured and unsecured debentures and bonds.
The main sources of these long-term fudns are the banks and capital markets.
The need for financial planning and control therefore arises because financial
resources are limited and costly and even where the resources are available the
areas into which they could be applied profitably are diverse.
Moreover, planning and control act as a device that enable management to
anticipate changes and adopts it. No business can exist well without some
form of planning and control. Success in business is proportionate
to its planning and control and the skill with which it affairs is being
managed by the management.
According to lenke and Edward financial planning and control can
therefore be said to be “the name given to a system which is being used to
increase the overall management efficient”. It is concerned
with planning for the allocation of resource to assist in achieving the
objectives of effectiveness and efficiency of both Long and small-scale
organizations.
1.2
STATEMENT OF PROBLEMS
Some business organizations are
not performing well as a result of poor financial planning and control, some
are left uncompleted after committing a very huge sum of money due to
inadequate financial management while other will remain in
operation successfully. There has been situations where organizations after
many years of establishment will collapse, many of them are even well planned;
financed and managed while others will stand the test of time. The
questions to ask in these situations includes:
1.
Whether inefficient Financial management and control is the reasons for
corporate failures;
2.
Most organizations are well planned and managed, yet facing problems of
illiquidity.
3.
Some organizations with high capital base and others with, low capital still
having the same chances of collapsing as a result inefficient management of
working capital.
This research project is an attempt to
address these and other problems militating against financial planning and
control as key towards achieving management efficiency.
1.3
PURPOSE OF THE STUDY
Planning and Controlling are
successful ingredients of management at all levels. Proper exercise of
planning and control is often the key managerial efficiency and growth is
view of these ; the purpose of this study are:
i.
To develop a realistic picture of how financial planning and control can help
to make an organization more efficient, effective, successful and ensure growth
ii.
To find out the extent to which proper financial planning and control can
reduce business failures.
iii.
To see how financial planning and control can be adopted and improved to aid
efficient and effective operation and suggest practical solution to these
problems.
iv.
To know the extent to which financial planning and control affected Union Bank
(Plc)
1.4
RESEARCH QUESTIONS
For proper guidance and in-depth
investigations of the research work, the researcher presented research
questions which form major problems of the investigation:
These questions includes:
-
Has financial planning and control significant relationship with management
efficiency?
-
Does proper management of working capital enhance Profitability?
-
Is the use of financial management and control techniques essential for
achievement of cooperate goals?
-
Can it be said that financial management and control are part of internal
control procedure?
1.5
STATEMENT OF HYPOTHESES
This research project is based on
the f hypothesis:
The null hypothesis (Ho) and the
alternative hypothesis (Hi)
1.
Ho: Proper financial Planning
and control don’t contribute to management efficiency.
H1: proper financial
Planning and control do contribute to management efficiency.
2. Ho:
Long-term or straight planning can not affect the company objectives.
H1
Long term or straight planning can affect the company’s objectives
3. Ho: Proper management of
working capital does not enhance adequate profitability.
Hi:
Proper Management of working capital does enhance adequate profitability.
1.6
SIGNIFICANCE OF THE STUDY
This research work will go a long way
to helping organizational managers to plan and control source resources of
meeting the objective of the organization through greater efficiency,
productivity and profitability.
Moreso, how cost of product, price stability increase in turnover and adequate
profit remains the overall measure of management efficiency and sign of
business success.
Therefore, the important of this study will be in the development of method of
using financial planning and control to help management in making relevant
policy decisions which if well applied will result to increase efficiency and
effectiveness of the firm. This will in turn help to create avenues for the
firm to achieve their optimum profitability which will be beneficial to the
shareholders, employees, creditors and government. It is also hoped that the
result will be of benefit assistance to students of business and vocational
studies as well as others wishing to research into relate topics.
1.7
SCOPE OF THE STUDY
The study of financial planning and control as a key towards achieving
management efficiency was based on information collected from the staff of
“Union Bank Plc, Nigeria, Books, journals and Newspapers related to
financial planning and control. This study is also limited to one bank
basically because of certain factors.
These factors includes;
a.
Finance: Lack of finance was a major handicap in this research project.
This is a result of the huge transport cost involved in the collection of
information necessary for the work.
b.
Time: Time equally posed a very big
constraints in this research work in the sense that the time for the study was
limited and could not accord the researcher the opportunity to cover some other
banks that could be involved in the research.
c.
Accessibility: During the course of this
research project, the researcher found it very difficult to have access to the
population of interest and as a result, not all the desired information was
collected since enough visit was not made.
d.
Reluctant attitude of Respondents: The research
work was equally saddled with the problem of the reluctant attitude of
respondents who found it difficult to avail the researcher with
information necessary for the work for fear of exposition.
1.8
DEFINITION OF TERMS
Finance:
The evaluation and acquisition of productive assets, procurement of the funds
and disbursement of funds.
Planning:
This is the process by which a bank solves problems as relating to its
environment.
Control:
This is the process employ by the management to ensure that the to ensure
that the course of action are maintained and that the desired ends are
achieved.
Efficiency:
This is concerned with the quality through the resources required to
achieve an organizational goal in order words it is the ratio of
output to input.
Management: This
is the process by which systems are administered, in other words it is the body
of knowledge representing what managers do.
Budgeting:
This is an expression in financial and quantitative terms of a bank’s plan of
action prepared in advanced of the period to which it relates and with
the aim of attaining a given objective.
Forecast: This
is the process of determining what is required of an event that will occur in
future use the past behaviour of such an event.
Decision-Making: This
is the purposeful choosing from a number of alternative courses of action.
Working Capital: This
is the difference between the inflow and outflow of funds; in other words, it
is the excess of the current assets over the current liability and provisions
(Net working capital)
1.9
BRIEF HISTORY OF UNION BANK PLC, NIGERIA.
Union Bank Plc is a large commercial
bank serving individuals, small and medium sized companies, as well as large
corporation and organizations. In July2009, it was rated the 556th
largest bank in the world and the 14 largest banks in Africa with an asset base
estimate at US $826 million. That assets value makes it the 9th
largest commercial bank in Nigeria by assets valuation.
The bank was founded in1917 as colonial Bank. In 1925, Barclays
Bank acquire colonial Bank, changing the banks name to Barclays bank
(Dominion, Colonial and Diserseas) or Barclays Bank (DC0). 1n 1969,
Barclays Bank of Nigeria Limited to comply with new banking law
enacted in1968.
In 1971, the shares of the bank stock were listed on the Nigerian stock
exchange. In the saw new year, 8.33% of the bank’s shares were offered to
Nigerians. The following year, the Federal Government of Nigeria acquired
51.67% ownership of the bank, leaving Barclays Bank Plc of London with 40%
ownership. In 1979, that 40% was sold to Nigerian individuals and businesses to
comply with then recently enacted banking and investment laws. The bank changed
its name to Union Bank of Nigeria Plc, to reflect its new ownership structure.
In 1993, the federal Government of Nigeria completely divested its
ownership in the bank .subsequently, Union Bank of Nigeria Plc, acquired
the former universal Trust Bank Broad Bank Limited. It also absorbed its
former subsidiary union Merchant Bank Limited.
The bank Maintains a vast network of interconnected branches in all
Nigerian states. It has two wholly owned bank subsidiaries, one in Cotonou,
Benin and Another London, in the United Kingdom. It also maintains a
representative office in Johannesburg, South Africa.
The bank’s activities are supervised by a fourteen (14) member Board of Directors
chaired by Prof. Musa Gella Yakubu, One of the non Executive Directors, a
former Director of the central Bank of Nigeria.
The management Board is chained by Mrs. Olunfunke Iyabo osibodu, who serves as
the maintaining director and Chief Executive Officer of the Bank. She has been
at the helm of the bank Since August 2009.
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